To ask Her Majesty’s Government (1) what interest rate they use for discounting future income and expenditure when evaluating capital projects; (2) which government department is responsible for determining the rate; (3) what guidelines they use; and (4) when the interest rate was last changed.
The government uses a discount rate to evaluate capital projects known as the Social Time Preference Rate. This rate is used to convert costs and benefits that occur at different points in the future to ‘present values’ thereby allowing comparison.
This rate is currently 3.5% and tapers depending on the life of the appraisal period, as set out below.
Period of years